Detroit bankruptcy judge pushes hearing on debt plan to Aug. 14

June 9 Mon Jun 9, 2014 4:38pm EDT

June 9 (Reuters) - The federal judge overseeing Detroit's bankruptcy delayed, by three weeks, the start of a hearing to confirm the city's debt adjustment plan, raising the possibility that the case could drag on beyond the term of Detroit's emergency manager.

Judge Steven Rhodes on Monday released the case's fifth revised schedule, pushing back the start of the hearing until Aug. 14 from July 24. The schedule listed as many as 28 hearing days that could stretch until Sept. 23.

That means the bankruptcy case the city filed in July 2013 could drag on beyond Kevyn Orr's 18-month term as the city's state-appointed emergency manager. Under Michigan law, Detroit's elected officials could opt to remove Orr in late September. Orr has indicated he expects to leave the job at that time.

Michigan Governor Rick Snyder told reporters on a conference call last Wednesday that he hoped the confirmation trial would be over by the end of September, leaving at the most several weeks until the plan's effective date.

"We'll be prepared with appropriate contingencies," he said, declining to discuss options.

Orr and his team of consultants had originally pushed for a speedy schedule to wrap up the biggest municipal bankruptcy in U.S. history. But the complex case has taken longer than expected. The city's plan to adjust $18 billion of debt and other obligations was first filed with the court on Feb. 21 and has been revised several times as Detroit reached new settlements with creditors.

Last week, a group of so-called objecting creditors that includes bond insurers, banks and unions proposed moving the confirmation hearing's start to Sept. 18, contending the city's tardiness in producing documents does not afford them enough time to prepare for the proceeding.

The city countered on Thursday that a two-month delay was not warranted as it has already produced "tens of thousands of documents that the objectors have requested." Instead, Detroit's attorneys suggested changing the trial's start to Aug. 11 with its conclusion targeted for Sept. 12.

Rhodes, who must determine if Detroit's plan is fair and feasible, has also delayed until July 16 and 17 a hearing on legal issues in the case that had been set for June 24. But his timetable continues to call for thousands of Detroit creditors to complete voting on the debt adjustment plan by July 11.

James Spiotto, managing director of Chapman Strategic Advisors and an expert on municipal bankruptcy, cautioned that moving the case along too quickly could give ammunition to creditors who choose to appeal the outcome of the case.

"As much as you want to stay on track you want to make sure people have time. It's the notion of due process," he said in an interview on Friday, adding that creditors could claim abuse of discretion or denial of due process in their appeals.

Still, he said, most Chapter 9 municipal bankruptcies end in settlements and do not result in appeals.

(Reporting By Karen Pierog; Additional reporting by Tom Hals and Lisa Lambert; Editing by Steve Orlofsky)

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